Forex Hedging Explained | Never Blow A Forex Account Again

Alan Solar, the passive income guru in this video tutorial is going to explain to you the power of hedging and how never to blow a Forex account again.

Right? So I need to explain to you what hedging is. So hedging is basically placing a a trade in the opposite direction of a current trade that is open with exactly the same size lots that you used in your current open trade. So let's say you have a trade open euro US dollar and it's a sell position at 0.22 and let's say that trade goes south. Now instead of closing it in a loss, what you can do is you can open a sell position on 0.2. What this will do is it will freeze your exposure, it will freeze the amount of money that is being used in trades so that you can analyze the chart and it' you an opportunity to make decisions emotionlessly. Okay? So how you would do that is in the top right hand corner of your MT4 there is a plus sign. You would need to click on the plus sign and generally if you've never done this before, it'll usually come up with the first pair that is listed in your quotes, which for me is the AUD USD. So what you would need to do is you would need to change that to the trade to the pair that you want to hedge on. In our case it's Euro US dollar so you would need to click on the Euro US dollar and see that it's changed over here. You would then need to use the exact same lot size that you used in the trade in the new trade that you want to hedge against in the old trade. So in this case it is 0.22. So you would go back here and you would type in here. Generally speaking if you've never done this before it will say there 0.00 and you must make sure that market execution, that the trade type is market execution. It mustn't be on buy limits on buy stop or sell stop. It must be market execution. Okay? And then you would put in here your lot size which is 0.22 and then make sure that you are doing the trade in the right direction. So always go back to your screen and make sure because generally speaking when you're hedging for the first time your emot it is okay and you, you've got a memory like.

Like Dory. So and we don't want you to be like Dory, okay? We want you to make good emotionless decisions. Okay? So we are going to do a Sell trade. So you open it up, everything is saved, okay? You don't have to start again. And then you would click on the sell button. I'm not going to click on it because I'm already hedged on this trade, as you can see at the bottom of the screen. So I'm using a very safe Martingale ea. So let me explain why my EA is so safe. So let's go back here. I'm on the wrong currency. Maybe if I choose the right currency, we can see the trade. So normally a Martingale EA places trades at equal distances apart from each other, so it'll normally be between 10 and 15 pips apart. As you can see, the distance between my trades are not 14 pips, okay? They change all the time. And this is what makes REA very different to anybody else's, okay? And it's fairly safe Martingale ea. And occasionally, on the odd occasion, you'll need to jump in and change the settings. There is no such thing as 100% passive income. It doesn't exist. Get it out of your mind, okay? So I mean, even property, Property is not 100% passive. You need to actively be involved with your property. You need to fix and maintain your property, and you need to fix and maintain your tenants sometimes. So it's not 100% passive. Bitcoin is also not passive. There is no such thing as 100% passive income. It just doesn't exist. So just get it out of your mind and just know that on the very odd occasion, you'll need to change your settings on your ea. And that's okay. It gives you a fabulous opportunity to make a lot of money. Okay? So when you have lots and lots of trades open, no need to panic. Panicking is a choice, okay? Being calm is a choice. So let's be calm and let's do the right thing and let's make more money than we would normally do if the EA was trading when it was trading autonomously, okay? Automatically. Okay, so what did I do?

The currency trended down. My EA started opening up positions and I eventually decided that on 20% equity I needed to place a hedge trade. So what did I do? I decided to add up all my lot sizes that the eh, that the EA had made. So I took 0.22, added it to 0.30. Do this in an Excel spreadsheet because it becomes easy, right? As you can see, I've added up all my lot sizes and it comes to 34.64. So if we go back to my.

Goes back to my, my hedge. You can see that I placed a trade in the opposite direction at 34.64. So what has happened to my drawdown? Nothing. Nothing is going to happen. It's going to be exactly the same. My open trades here, that figure is not going to move. So what is going to happen if the currency decides to go further down? If the price of the strength of the US dollar gets stronger and the price of the US dollar decreases, basically the euro decreases, has decreased its value against the US dollar. So what will happen in trading terms? What will happen is, is that this sell position is going to get bigger and all my buy positions here, okay, are also going to get bigger, but in a red negative. So this is going to go more blue, okay? And these are going to go more red. The numbers are going to increase, but my equity over here is going to remain the same. So when do I close out the hedge? When is the right time to close out the hedge? So what I'll do is I basically go onto a day chart and I go and look for points of support and resistance. So as you can see here, there is a point, okay, of support. Support means so when you stand on the floor you are supported. When you touch the ceiling you are resisted. Okay? So the floor supports you. So this is called a support line. So I go left and I look for other points of. And wherever there seems to be a commonality, okay, of support and resistance, I draw my lines. As you can see, there's support here which is the same support over here. So I draw my line over there. So these are the various different support and resistance lines, okay? They just an indication for me to understand if the currency is going to, it could, the price could rebound on that level. But I don't base my trading on that. I base my trading on, on the doji and my moving averages, which is mainly my 8 exponential moving average. Right? So it's time for an ad break. And this is where I tell you about my free Forex course. And this is going to help you to trade emotionlessly. My Forex course is based on the Doji Candlesticks. Now candlesticks is a 400 year old tried and tested strategy developed by the Japanese rice traders who are the most sophisticated and most successful and traders of all time. Now on the screen now is flashing my course which is located on my channel, my Telegram channel. If you don't have telegram, download it. It's an app like WhatsApp, but better. And you load it onto your phone the instructions are on the on the the screen right now and also in the comments section on the video in YouTube. Scroll below the video and there's a comment section says comments or more information. Just open up the more information section and in there is the instructions or are the instructions for how you can.

Of the instructions on how you can.

On the instructions on how to join my my channel and also on how to go to my website the link to my website to learn how to read a forex chart. So what we want to know is we want to know when to close the hedge. When is the right time to close the hedge? So I normally analyze my charts and read a chart on a four hour chart. So we change it over here to four hours and this is the methodology that I use. Let me take a screenshot and I'm going to show you exactly what I'm waiting for. Let's Right, so what I've done is I've drawn a couple of lines here and a couple of candles. So this red and white dotted line is what I call the 8 exponential moving average. You can go through my learn to read a forex chart where you can learn how to set up your forex chart according to my strategy. On the screen now is the URL to my to my course and also in the comment section is the link to my learn to read a forex chart website. Okay. And by my channel on telegram. Right, so the question is when do we reverse? When do we close out the trade that hedge trade. So I've drawn what is going what the 8 exponential moving average is going to look like in the next few candles if it does reverse today or the next day. Okay, just is this is hypothetical. So as you can see, I've drawn a candle here and the candle did not open above the 8 exponential moving average. So that is not the indication that the TR that the trend has changed. Okay, when the when is the when is the correct time when the candle opens above the 8 exponential moving average. That is when you close your trade out. Now maybe this hedge over here, okay, this one over here is not, is now in a negative position because the price has trended up. Okay? So as you can see, the price trends a little bit up above the 34. And even if it goes a little bit up to there, so maybe that this hedge goes into minus 50 or minus 100, even minus 200, it's not serious because you've got all these trades that you're going to make massive profit from. So the amount of profit that you're going to make from these open trades is going to far outweigh the little loss that you're about to experience on with this hedge that you've placed. So just ignore it. Do not get emotional about it. Okay, so what are we going to do? Are we going to then reconnect the EA to the chart or are we going to then trade manually and create our own take profit? Now what I would do in this situation is I would, I would move the take profit, remove the EA from the chart and take advantage of the full trend of, of the currency. So let's look at the chart and you can see where the take profit is. The take profit is sitting on the 200 exponential. Sorry, on the 200 moving average. Now I've moved my moving average to that point over there. Why? Because I know from experience that when the currency hits or is very close to the 200 moving average, the price returns what seems to retrace. And then it can either retrace all the way down. As you can see here, it got very close to the 200 and then it started retracing all the way down. So you can see that all along. If you go look in the past, you can see exactly what I'm talking about. So when the price gets very close to the 200 moving average, I will then manually log in and then close by swiping from right to left on my phone. Let me show you. So you can see that. So right to left. Okay. And you get your options. This is only if you have installed your trader password on your phone. If you've only got your investor password on your phone, you won't be able to trade on your phone. You'll only be able to trade on the VPs. Okay, so now would, I would swipe like that and then I would click on the plus button and then it'll give me an option to close the trade and I'll say yes, I agree and then the trade will close and then I will close all these trades in a positive. So the, the option is. Okay, now some of you, your take profits may be. Let's go to this chart over here and let's not. So some of you, your take profit.

Let'S get a little line going here maybe like here. So you're going to miss out on the full trend and the growth that you could possibly and benefit from. So I would then just get involved and trade manually. So the currency sometimes stops on this line. So this, this line over here.

This line, this red and white dotted Line over here, it's purple and white on my H4 chart is actually the 200 moving average on my, on my H1 chart. So let's just.

Go and do that quickly. Is this an H4?

Right, let's move this, Let me just move this down to over there. Okay, so I'll enlarge it so it looks like the same on my picture. So there we go. So there's the 2, there's the, the 50 moving average on my H4 chart, red and white line, which is the 200 moving average on a, on an H1. So there it is. There's the same line as you can see, and that is a key reversal point. So you need to be very careful at that point. If it starts to retrace there, then I would close out the, the trades if you can. Okay. Or wait a little bit for it to go north. Okay. So that's how, when you would get out of your hedge and stay in the trade to try and benefit from the, from full, the full length of the trade. Right. So you now know how to hedge. Very simple. Nothing complicated, nothing to get emotional about. It's just part of trading and you'll, you'll get the hang of it. Don't be afraid of it. It's an amazing tool that's going to assist you to make more profit and protect your capital. As Warren Buffett says, his main rule is protect your asset, don't lose money, make profit. Those are the three rules. But the most important rule is to, to protect your capital at all costs. Do not lose money. Okay? And this is what the hedge does. Now I just want to show you something amazing which I'm sure a lot of you aren't aware of. Now this is called swap fees over here. Now a swap fee is a fee that is charged to you by the forex company for holding the trade overnight. So for every day that you hold the trade, you, you, you're going to pay a swap fee. Now, as you can see, my fees are zero. I've had this trade since the 1st or 16th January 2020 and there are no swap fees. So how did I do that? It is a, an arrangement that I have with my broker that allows us not to have these swap fees. Now if you want to take advantage of this, then you need to sign up with my broker using this link. Now, if you have signed up with the, with my broker and you.

Still have swap fees, just WhatsApp me and I will help you and we will guide you to get your swap fees removed. The the link is flashing on the screen and also in the the information section of the video on YouTube is my link to the broker. And you can just WhatsApp me. Here is my WhatsApp number. Just WhatsApp me and I will then assist you to remove your swap fees, which is just an amazing benefit being part of my RB structure. Okay. So I hope that you enjoyed this video and I'll see you on the next videos.